Reimbursable Expenses: What Counts, What Doesn't, and How to Handle Costs You Bill Back to Clients

Reimbursable expenses are business costs someone pays up front and gets paid back for later. Inside a company, that usually means an employee paying for travel or supplies with personal money and the company repaying them. Between companies, it means a firm paying a cost on a client's behalf and billing it back on the client's invoice.

Both meanings carry the same risks. Money moves twice, receipts go missing, and costs that should have been billed to a client quietly stay on the firm's books. Getting both right starts with knowing what qualifies, then documenting and recording it consistently, and finally shrinking the share of spending that needs reimbursing at all.

Key Takeaways

• Reimbursable expenses are either employee costs the company repays or costs a firm bills back to a client.

• What's reimbursable is set by company policy and, for clients, by the contract. Many items depend on the policy wording.

• IRS rules generally require receipts or similar evidence, with an exception for small non-lodging expenses.

• Client billbacks need tagging at the moment of spend, or they get lost before the invoice goes out.

• Corporate cards remove most employee reimbursements, though mileage and some out-of-pocket items remain.

What are reimbursable expenses?

Reimbursable expenses are costs paid by one party that another party has agreed to repay. For employees, the agreement is the company's expense policy. For clients, it's the contract or engagement letter.

Employee reimbursements have a tax side. Under an accountable plan, IRS Publication 463 lists safe-harbor timing for an adequate accounting "within 60 days after they were paid or incurred," with any excess returned "within 120 days after the expense was paid or incurred." Reimbursements "that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan," according to the same publication. The guide to employee expense reimbursement covers those rules in more detail, and your tax advisor can apply them to your plan.

Client reimbursements work differently. The firm buys something for a project, such as travel or filing fees, and passes the cost to the client at cost or with a markup the contract allows.

Which business expenses are reimbursable, and which usually aren't?

Business expenses are reimbursable when they're necessary for the work, within policy, and documented. Personal costs and anything the policy excludes usually aren't. Here are the common categories:

The hard cases are where policies differ. These depend on what your policy says:

Write the edge cases down. Only 39% of companies have a written, up-to-date expense policy, according to Center's 2024 trends survey, which means many employees guess and many approvers decide case by case. A current travel and expense policy that lists these items saves most of those arguments.

What documentation does a reimbursable expense need?

A reimbursable expense generally needs a receipt or similar evidence showing what was bought, when, where, and why. IRS Publication 463 says you "must generally have documentary evidence such as receipts, canceled checks, or bills, to support your expenses," with an exception for an expense "other than lodging" that "is less than $75."

Company policy can require more, and client contracts often do. Clients billed for expenses usually expect copies of receipts with the invoice. A receipt management process that captures images at the time of purchase keeps those copies ready.

What should a reimbursable expense policy include?

A reimbursable expense policy should answer the questions employees ask most, so approvers don't have to answer them one at a time. At a minimum, it should cover:

• Which categories are reimbursable, with the edge cases spelled out

• Spending limits for meals, lodging, and ground transport, by city tier if travel varies

• The mileage rate and how trips are recorded

• Receipt requirements, including any threshold below which a receipt isn't needed

• Submission deadlines and how quickly the company repays

• How to mark costs billable to a client, and which project codes to use

• Who approves exceptions, and how to request one before spending

Keep the policy short enough that people actually read it. A two-page summary with a link to the full rules works better than a long document nobody opens.

Who decides when an expense is unclear?

The approving manager decides first, using the policy. When the policy doesn't answer the question, finance should make the call and write the answer into the policy so the next person doesn't have to ask.

A defined expense approval process helps here. It names who approves what, and at what amount, and who handles exceptions.

How do you handle reimbursable expenses you bill back to a client?

Handle client reimbursable expenses by agreeing on terms up front, tagging each cost to the client and project when it's incurred, attaching receipts to the invoice, and reconciling billed costs against what was spent. The step that fails most often is tagging, because a cost that isn't marked billable at the moment of spend rarely gets found later.

A workable billback process has four steps:

1. Contract terms define which expenses are billable, whether they're billed at cost or with a markup, and any caps or pre-approval rules

2. Tagging at the moment of spend marks each purchase with the client and project, on the card transaction or the expense report line

3. Invoicing pulls tagged costs onto the client invoice with receipt copies attached

4. Reconciliation compares billable costs incurred to costs billed each month and chases anything left over

In my experience, firms lose more billable expenses to missed tags than to client disputes. A consultant books a flight on a personal card, submits it a month later without a project code, and the cost lands in general travel expense. Nobody bills it, and the margin on the engagement drops without anyone noticing. Corpay's 100+ ERP integrations, including NetSuite, Sage Intacct, Business Central, and Acumatica carry a billable tag from the card transaction into the ledger.

Revenue presentation is a judgment call. A FASB and IASB Transition Resource Group staff paper on gross versus net revenue treats out-of-pocket expenses billed to customers under the principal-versus-agent guidance, stating "For items such as shipping and handling fees and other out-of pocket expenses, this guidance is applicable." Whether a billback is presented gross as revenue or net as a pass-through depends on the facts, and that's a question for the company and its auditor.

Firms that bill federal contracts have an extra layer. FAR 31.205-46 allows travel costs incurred by contractor personnel on official company business, subject to its limitations, with lodging, meals, and incidentals based on per diem, actual expenses, or a combination that results in a reasonable charge.

What should a client contract say about expenses?

A client contract should say which expenses are billable, how they're priced, and what proof the client gets. Vague language such as "reasonable expenses" invites disputes at invoice time, especially when a project runs long.

Spell out whether expenses are billed at cost or with a handling fee, and whether travel follows the firm's policy or the client's. Many clients set their own limits on airfare class and hotel rates, and the firm needs those limits before anyone books. Add a cap or a pre-approval rule for large items, so a surprise charge doesn't sour the relationship.

Finally, agree on documentation. Some clients want receipt copies with every invoice, while others accept a summary with receipts on request. Settle it at signing, because rebuilding receipts months later is slow and sometimes impossible. A one-line clause now saves a long email thread at the end of the engagement.

How do you account for reimbursable expenses?

Account for reimbursable expenses according to who repays whom. These illustrative entries show the basic pattern for a $420 hotel stay:

• An employee reimbursement debits travel expense $420 and credits cash $420 when the employee is repaid

• A client billback, presented gross, debits accounts receivable $420 and credits reimbursable expense revenue $420 when the client is invoiced, with the original cost recorded as an expense when incurred

• A client billback, presented net, records the cost and the billing against the same pass-through account so they offset

Which client treatment applies depends on the principal-versus-agent analysis above. Most ERPs and accounting tools, QuickBooks included, let you mark a cost as billable and assign it to a customer, so it flows to the invoice automatically.

Why do reimbursable expenses cost more than they look?

Reimbursable expenses cost more than they look because every one has to be submitted, reviewed, approved, repaid, and recorded, on top of the expense itself. Each step takes time from the employee, the approver, and finance.

Processing alone isn't cheap. The average cost to process an expense report for a single-night hotel stay was $58 in a 2015 GBTA Foundation study sponsored by HRS, according to GBTA. Reimbursement also carries fraud risk. Expense reimbursement schemes were 13% of occupational fraud cases in ACFE's 2026 study, with a $36,000 median loss, according to ACFE's Occupational Fraud 2026: A Report to the Nations. In the US and Canada, 15% of cases involved expense reimbursements, per the same report.

Employees carry a cost too. They float the money until they're repaid, often on a personal card. Some go further. In SAP Concur's 2025 global survey of 3,750 business travelers, 85% said they would spend their own money on perks to improve business travel. That's a sign of how blurry the line between business and personal spending gets on the road.

How fast should employees be reimbursed?

Reimburse employees on a predictable schedule, ideally with each regular payroll run or weekly by direct deposit. There's no reliable published benchmark for reimbursement speed, but the principle is simple. The longer an employee floats company costs, the more the expense policy feels like a loan they never agreed to.

Fast repayment also improves compliance. Employees who know they'll be repaid within days submit promptly and attach receipts, which helps the company stay inside the accountable-plan timing. Slow repayment encourages batching, and batched reports are where receipts go missing. Expense reimbursement software can route approvals and trigger payment automatically once a report clears.

My position is simple. Every reimbursable category a card can cover should move to a card. Reimbursement should be the exception for costs a card can't handle, not the default way employees pay for business spending.

Do reimbursable expenses go away with corporate cards?

Reimbursable expenses mostly go away with corporate cards, but not entirely. Cards cover travel and meals plus most supplies, which make up the bulk of most expense reports. Mileage in a personal vehicle, tips paid in cash, and purchases from vendors that don't take cards still need reimbursement.

Card use is already widespread. US credit card payments reached 67.1 billion in 2024, up 16.2 billion from 2021, counting consumer and business cards together, according to the Federal Reserve Payments Study. Commercial cards were 20.70% of combined US consumer and commercial card purchase volume in 2024, according to the Nilson Report.

Tools haven't always kept up with cards. Corporate card distribution grew 46% in 2023, while expense tool implementation rose only 2%, according to the same Center survey. Handing out cards without a way to capture receipts and coding moves the paperwork rather than removing it. Employee credit cards work best with controls and receipt capture built in, and a corporate travel card covers the trip costs that generate most reimbursements.

The scale makes the choice worth getting right. Global business travel spending is forecast at a record $1.71 trillion in 2026, across about 1.84 billion trips, according to GBTA's 2026 Business Travel Index Outlook.

Move reimbursable spend onto Corpay commercial cards

Reimbursement is the costliest way to pay for business spending. Corpay expense management moves most reimbursable categories onto company cards, with spending rules, mobile receipt capture, and automatic coding, so billable tags travel with each transaction.

Corpay virtual cards handle one-off purchases with single-use virtual cards. Coded spend posts to the ledger through 100+ ERP integrations, with NetSuite and Sage Intacct among them alongside Business Central and Acumatica. Corpay has paid $800M+ in rebates per year, a return out-of-pocket spending never earns.

Frequently Asked Questions

What is a reimbursable expense?

A reimbursable expense is a business cost paid by one party and repaid by another under an agreed policy or contract. Common examples are an employee's travel costs repaid by the employer, or project costs a firm bills to a client.

What is the difference between reimbursable and non-reimbursable expenses?

Reimbursable expenses are business costs the policy or contract agrees to repay, such as business travel and client meals. Non-reimbursable expenses are personal costs or items the policy excludes, such as commuting, fines, and personal travel.

Are reimbursable expenses taxable?

It depends on the plan. Reimbursements that fail the accountable-plan rules are generally treated as paid under a nonaccountable plan, according to IRS Publication 463. Ask your tax advisor how the rules apply to your plan.

Can you mark up reimbursable expenses billed to a client?

It depends on the contract. Some agreements allow a markup or handling fee, while others require billing at cost. How the billback is presented in revenue is a separate accounting judgment for the company and its auditor.

How do you track billable expenses in QuickBooks or your ERP?

Mark each cost as billable and assign it to the customer or project when you record it. The billable item then appears on the next invoice, and reports show any billable costs not yet billed.

David Luther

Product Marketing Program Manager

David Luther, MBA is a product marketing program manager with years of experience in commercial banking, finance, and technology sectors, with research and writing appearing in financial publications.

Expense management

Commercial Cards